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Association of BellTel Retirees: Verizon Retirees to Shareowners: Vote Nay on Pay

^{Published on 2009-04-02 12:03:21, Last Modified on 2009-11-03 08:59:14 - Market Wire}
 

COLD SPRING HARBOR, NY--(Marketwire - April 2, 2009) - The Association of BellTel Retirees, an advocacy group representing the retirees of Verizon (NYSE: [ VZ ]), is urging shareowners to vote against the company's senior executive compensation package (Proxy Item 3) and also vote to separate the offices of Chairman and CEO (Proxy Item 8), both of which are currently held by Ivan Seidenberg. The Verizon annual shareowners' meeting will be May 7 in Louisville, KY.

Verizon is the largest publicly held company to have a "say on pay" proxy proposal on their ballot. In 2007 the Association of BellTel Retirees ([ www.BellTelRetirees.org ]) led the movement, which successfully passed the company's "say on pay" proxy.

In a letter sent to thousands of shareowners, retiree association president C. William Jones said "shareholders want enhanced accountability and compensation policies better aligned with shareholder interests," in calling for more challenging performance hurdles and fewer windfall termination benefits. They are also seeking to end what Mr. Jones calls "contradictory practice of the same person serving as CEO and Board Chairman, in effect making someone their own boss."

"A no vote on executive compensation is the only way to nudge the board towards a more realistic pay structure that benefits shareowners," said Mr. Jones. "The compensation structure for the company's senior executives has to be more closely related to how the company is performing for its owner, the stockholders."

A study by the Corporate Library has singled out Verizon for two consecutive years as one of 12 "Pay for Failure Companies" with the worst combination of excessive pay and negative shareholder returns over the most recent five year period ("Pay for Failure II," May 2007). In its shareowner letter the retiree group details numerous faults it finds with Verizon's executive pay plans:

Performance Shares a 'Gimme': The Corporate Library's 2008 update on "Pay for Failure" pointed out that the company would have to perform below the 20th percentile for executives to receive nothing for 2008. For the 2008-2010 cycles, 100% of the target PSU award is paid out for Total Shareholder Return (TSR) at the 50th percentile among "Related Dow Peers."

Golden Parachutes: If CEO Ivan Seidenberg is terminated or retires he receives a $30.5 million severance which is more than five times his base salary plus bonus. He gets $29.2 million after a change in control if he is not terminated. President & COO Dennis Strigl would receive $40 million if he is terminated after a change in control, 13 times his base salary plus bonus.

Golden Coffins: Upon termination of employment due to death, Seidenberg would receive an additional $35.5 million while Strigl would receive $50.8 million. This is over and above any pension or deferred compensation (which pays out tens of millions more).

Executive Pensions: The new nonqualified defined contribution plan applies benefit formulas more generous than those that apply to rank and file managers or employees. For example, Seidenberg received $814,000 in SERP compensation for 2008, a $491,226 company contribution to his non-qualified plan for 2008 and an additional $322,862 in "above market earnings" on his non qualified assets.

Tax Gross-Ups: Because the IRS treats company payments for personal travel and life insurance as income, the shareholders reimburse the executives for the taxes that they must pay on these benefits.

The retirees are also calling on Verizon shareowners to vote for proxy item 8 to separate the roles of Board Chairman and CEO, asking that future board chairmen be selected from independent directors who have not served as an executive officer of the company.

"We believe that separating the roles of Chairman and CEO is fundamental to sound corporate governance," said Mr. Jones. "When the CEO is also the Chairman of the Board the lines of accountability get blurred, compensation is less tightly aligned with shareholder returns and the decision to replace a poorly performing CEO can be skirted or delayed."

Numerous studies have found that shareholder returns are higher on average at firms with non-executive chairmen. A Booz Allen Hamilton study of the world's 2,500 largest public companies (CEO Succession 2005: The Crest of the Wave) found that in North America over the preceding three years, non-chairman CEOs produced shareholder returns three times as high as those of CEO/chairmen.